Company managing director Richard Tweedie told the 7th annual New Zealand Power Summit conference in Auckland yesterday that LNG importation could “materially damage the gas market”.

If such generators as Contact Energy and Genesis Energy decided to import LNG then Todd Energy would use its gas entitlements to make electricity and sell that power into the wholesale market rather than sell gas directly, according to Tweedie.

Todd Energy was already investigating building its own 200MW power station to do exactly that, he said.

Todd Energy is NZ’s largest domestic oil and gas explorer and producer, with interests in the commercial Maui, Kapuni, McKee and Mangahewa fields and the possible NZ$1 billion Pohokura project.

Tweedie also claimed power companies were misrepresenting the current gas supply situation, citing more expensive gas as a reason for raising electricity prices.

Generators were still burning cheap Maui gas in their power stations, not the more expensive gas coming into the market, he said. New wholesale gas prices were around NZ$67 per gigajoule, while Maui gas cost companies NZ$2-3 per GJ.

"Clearly electricity prices have been sold on a misrepresentation," Tweedie said.

But industry commentators say that while Maui gas is still being burnt in some power stations, much is a mix of Maui and more expensive gas from other sources, such as the Tawn fields, or from other players such as NGC. In addition, the Genesis 1000MW Huntly station now runs on a more expensive 80% coal-20% gas mix, the reverse of several years ago.

Tweedie said insufficient competition in the electricity sector had led to "significant market dysfunction", with the government protecting and favouring its own enterprises – Meridian Energy, Genesis, Mighty River Power and national grid operator Transpower.

The big power generators were also New Zealand's biggest power retailers, able to match their supply with demand from their business and residential customers. "It's a jack-up," he said.

Tweedie also criticised the failure of the Contact-MRP drilling fund announced at the 2004 NZ Petroleum Conference.

He said the fund had been designed to pay out at least NZ$80 million, but no payments had so far been made, nor had there been a clear process or criteria for applicants.

"One would suspect the overture was PR spin. Apart from the fancy PR announcement there has been nothing," Tweedie said.

But commentators say some of the likely downstream candidates to have joined the fund have since pursued their own initiatives. Methanol producer Methanex has joined Bridge Petroleum and Westech Energy in the Radnor gas find; and Kapuni ammonia urea plant owner Balance Agri-Nutrients and MRP have both joined Swift Energy in separate gas exploration programs. Genesis has joined the strategic Cardiff prospect evaluation.

Finally, Tweedie told delegates that fears of a looming gas shortfall were overstated as New Zealand had a window of "some years" before a decision was needed on the next source of fuel.

The big power generators - Contact and Genesis - were complaining that they could not enter contracts for the supply of gas for their power stations, but they simply did not want to make the necessary commercial arrangements, Tweedie argued.

"There's a lot more gas than a lot of these people are saying," he said.